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The Deterrence Effects of U.S. Merger Policy InstrumentsJoseph A. CloughertyUniversity of Illinois at Urbana-Champaign; Centre for Economic Policy Research (CEPR) Jo SeldeslachtsUniversity of Amsterdam; Tinbergen Institute July 4, 2011 Tinbergen Institute Discussion Paper 11-095/1 Abstract: We estimate the deterrence effects of U.S. merger policy instruments with respect to the composition and frequency of future merger notifications. Data from the Annual Reports by the U.S. DOJ and FTC allow industry based measures over the 1986-1999 period of the conditional probabilities for eliciting investigations, challenges, prohibitions, court-wins and court-losses: deterrence variables akin to the traditional conditional probabilities from the economics of crime literature. We find the challenge-rate to robustly deter future horizontal (both relative and absolute) merger activity; the investigation-rate to slightly deter relative horizontal merger activity; the court-loss-rate to moderately affect absolute-horizontal merger activity; and the prohibition-rate and court-win-rate to not significantly deter future horizontal mergers. Accordingly, the conditional probability of eliciting an antitrust challenge (i.e., remedies and prohibitions) involves the strongest deterrence effect from amongst the different merger policy instruments.
Number of Pages in PDF File: 44 Keywords: antitrust, deterrence, merger policy JEL Classification: L40, L49, K21 working papers seriesDate posted: July 18, 2011Suggested CitationContact Information
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